Per diems help pay for lawmakers' real estate

New York lawmakers get $174 a night in per diems each night they spend in Albany on official business. Some use that money to gain equity in homes, which they can later sell and keep the proceeds.
Jon Campbell / Albany Bureau

Former Gov. David Paterson and his ex-wife, Michelle Paige, sold this home in suburban Albany for $325,000 in March, according to property records. They bought it in 2001 for $286,051.(Photo: Jon Campbell / Albany Bureau)

ALBANY - Former Gov. David Paterson and his then-wife were looking for a second home, a place to spend a few weeks a year where their kids could ride bicycles away from the crowded streets of Manhattan where they lived.

In 2001, they settled on an unconventional choice: suburban Albany.

That year, they bought a $286,000 home in the town of Guilderland that gave their kids room to play and allowed Paterson — then a state lawmaker — to stay near his Capitol office to work.

But there was another benefit: Each night Paterson spent in Albany on official business, he was able to claim a taxpayer-funded per diem to help cover his expenses. He and his ex-wife sold the home for $325,000 earlier this year.

Paterson is one of at least two dozen current or former state lawmakers to purchase a house, condo or apartment in the Albany area and use their per-diem payments to help cover the costs, according to a review of county records by the USA TODAY Network's Albany Bureau.

Most lawmakers book hotel rooms or rent an apartment in Albany when the Legislature is in session. They receive a per diem, currently $174, each night they spend here to cover expenses.

It's completely legal, however, for lawmakers to put their per-diem money toward the purchase of a house. And when the lawmaker sells the home, they get to keep the proceeds.

"It effectively allows them to pocket the per diem," said Blair Horner, executive director of the New York Public Interest Research Group. "While it may not mean that much to the taxpayer, they are effectively keeping the money because once they sell the condo, they keep the money."

How it works

State lawmakers make an annual salary of $79,500 plus stipends for various leadership positions.

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There are no restrictions, however, on how state lawmakers can spend the money so long as they prove they were in Albany and certify the trip was on official business.

In 2016, lawmakers claimed a total of about $2 million in per diem payments, according to the state Comptroller's Office.

Among current lawmakers, at least 10 have bought or sold a home in the Albany area in recent years, according to deeds filed with the clerks of Albany and Rensselaer counties.

The lawmakers who own homes cite the convenience of having a constant place to stay in Albany, where they spend about half of their time in the first six months of the year when the Legislature is in session.

And there are costs involved other than just a mortgage, property taxes and maintenance, among them.

“I decided to purchase a condo near the Capitol out of convenience given how much time I spend in Albany year-round," Assemblywoman Donna Lupardo, D-Endwell, Broome County, said in a statement. "I use the per diem to pay for meals, condo fees, and school and property taxes.”

Sen. Joseph Robach, R-Greece, sold his Rensselaer house in February for $128,000 after first purchasing it with then-Assemblyman Joseph Crowley — now a congressman from Queens — for $88,500 in 1997. Robach spent $58,000 buying Crowley out in 2010, according to records.

It's not clear whether Robach was staying in the home when he was in Albany in recent years, however. His financial disclosure forms show he collected at least $5,000 in rental income at the property each of the last five years. In 2012, he listed it as a "secondary residence".

Robach, who received $12,783 in per diems last year, did not respond to requests for comment.

State Sen. Joseph Robach, R-Greece, Monroe County, sold this home in the city of Rensselaer for $128,000. He bought it with another lawmaker in 1997 for $88,500.(Photo: Jon Campbell / Albany Bureau)

Another Rochester-area lawmaker, Assembly Majority Leader Joseph Morelle, owns a condo in nearby Guilderland. But his office said he bought the condo for his son, a student at the University at Albany.

"Several years ago, the assemblyman purchased a small two-bedroom condo, which he paid for personally, for the purpose of providing year-round housing for his son, who is currently a student at the University at Albany," said Sean Hart, Morelle's deputy chief of staff.

Morelle stays in a downtown Albany hotel when he's at the Capitol, according to Hart. But Morelle had gone the condo route before: He bought one in Albany in 1997 for $108,500 and sold it in 2005 for $157,000, according to county records.

Former Sen. Michael Nozzolio, a Seneca County Republican who retired in 2016, still owns a condo in the town of North Greenbush, Rensselaer County. He first bought it with former Rep. Tom Reynolds — then a state lawmaker — in 1990.

Popular co-op

One particular co-op in downtown Albany has been popular with lawmakers over the years.

Three lawmakers currently own apartments in that eight-unit co-op: Lupardo; Sen. John Bonacic, R-Mount Hope, Orange County; and Senate Deputy Majority Leader John DeFrancisco, R-Syracuse.

Former Sen. Suzi Oppenheimer, D-Mamaroneck, Westchester County, sold her apartment there in 2014 for $82,000, about 26 years after she first bought it. Former Sen. George Maziarz, R-Newfane, Niagara County, sold his unit for $85,000 in 2014 after buying it from DeFrancisco for $40,000 in 2001.

"There's six senators in an eight-apartment co-op, and we've all become close through the years because we lived there for, gosh, maybe 20 years together and helped each other out when we needed help," Oppenheimer said during a farewell speech in the Senate in 2012. "Our illustrious counsel who saved us all kinds of money, John DeFrancisco, he got our assessment reduced and other wonderful things."

Lupardo, who received about $12,000 in per diems last year, bought her apartment from former Sen. Charles Fuschillo, R-Nassau County, for $79,000. Her property taxes are about $2,000 a year, according to a property-tax calculator by the Empire Center, an Albany-based think tank.

DeFrancisco, R-Syracuse, said he doesn't see his ownership of a small condo in Albany as a lucrative investment, saying he doesn't think property values have gone up.

A potential Republican gubernatorial candidate next year, DeFrancisco said he bought the place as a convenience rather than staying in a hotel.

"It’s definitely a lifestyle situation, and it’s not a good investment, and I don’t think anybody ever made it a good investment," said DeFrancisco, who collected about $13,000 in per diems last year. "It’s a convenience."

Assemblyman Amy Paulin, D-Scarsdale, offered a similar explanation.

Paulin, who bought a $95,000 Albany condo in 2003, said she got frustrated having to find a hotel room every time she stayed in Albany longer than expected — which is common during parts of the six-month legislative session.

She recalled one time going to a hotel at 11 p.m. and it not having any rooms, leaving her scrambling for a place to stay.

So she and her husband bought an apartment near the Capitol, saying she is more productive and gets more work done by not having to hassle with hotel rooms.

"It’s a much more expensive option, but it is also one of great personal convenience," said Paulin, who collected $10,865 in per diems in 2016.

Paterson sells home

New York Gov. David Paterson is shown during a legislative budget meeting at the Capitol in Albany in 2010.(Photo: AP file)

Paterson, meanwhile, said he had been using his per diem to pay for a rental in Albany prior to buying the Guilderland house in 2001.

That year, he decided it made more financial sense to put the money toward something where he would gain equity.

"The per diems helped pay the rent when I was renting and I realized that could be part of a mortgage instead," Paterson said in an interview with the USA TODAY Network's Albany Bureau. "So it came out to the same thing. The same money that paid the rent paid the mortgage."

Paterson continued to use the home when he was elected lieutenant governor in 2006.

In 2008, then-Gov. Eliot Spitzer abruptly resigned amid a prostitution scandal, elevating Paterson to governor and giving him use of the Executive Mansion in Albany. After that, he began renting out the Guilderland home.

He and his ex-wife put the property on the market last year after their tenant moved out. It sold in March of this year for $325,000 — $39,000 more than the Patersons paid 16 years ago.

Change the system?

Paterson, who served in the Legislature from 1985 through 2006 and as governor from 2008 through 2010, said it's "not a bad idea" to talk about changing the per-diem system.

A lawmaker who owns a home in the Albany area may have more incentive to stay in the Capital Region and collect more per-diem payments, theoretically keeping lawmakers from their districts, he said.

He said it might be worth thinking of changes to the system not to hurt the lawmakers but rather to incentivize them to return home.

"In my case as minority leader, since there was kind of a need for me to be in Albany even off-session, it probably didn't make that much of a difference," he said. "But let's say when I was a legislator, the incentive should be to have legislators in their home district as much as possible."

Some, like California and Georgia, provide a per-diem rate similar to New York. Others give a far smaller per diem, including Minnesota's $86 a day. And some offer no per diem at all.

Some, like New York, do not require receipts; others do.

Reforms proposed

Horner, the NYPIRG director, said he believes it makes sense for lawmakers to have to show receipts for their actual expenses rather than get a flat per diem rate.

Gov. Andrew Cuomo, a Democrat, proposed just that in 2015 as part of a series of ethics reform measures, but it ultimately wasn't adopted by the Legislature.

When lawmakers were pushing for a pay raise in 2016 — they haven't had one since 1999 — Cuomo floated the idea of ending the per-diem system. Ultimately, the sides couldn't agree.

One state senator has a more radical idea.

Sen. Phil Boyle, R-Suffolk County, sponsored a bill in 2014 that would have led to the construction of a dormitory facility in Albany for lawmakers. He says the initial cost of building it would be more than covered over the long term by the reduction of per-diem payments.

Boyle himself bought a house near Albany for $350,000 in 2006. He sold it for the same price six years later when he was buying a house on Long Island.

His dormitory idea didn't fly with his colleagues, who weren't thrilled with the initial cost of the project or the idea of having to stay with each other in a dorm-like setting.

"That went over like a lead balloon for many different reasons," Boyle said.